Question

Imagine yourself as a CEO of a global software company like Microsoft. How will you decide your price policy?

Answer 1

Global firms like Microsoft are operating in an oligopoly market structure. In such a market structure, priority is accorded to the formation of a cartel in which different firms collectively exploit the market like a monopolist. In case formation of a cartel is not possible (owing to legal restrictions), then non-price competition is the best option. It implies greater reliance on advertisement (pushing and promoting the product by highlighting its merits) rather than price-cutting. Competitive price policy is often avoided. Because, whenever product price is reduced, the rival firms may offer a higher reduction, causing a fall in profits.